PUB. 18 2021 ISSUE 3

10 Appropriations and Finance Committee. The NMBA is strongly opposed to a state bank. The implications of creating a public bank pose risks to New Mexico’s taxpayers and would saddle the State with significant, unwarranted costs to replicate a highly competitive, regulated and federally-insured banking system that exists in communities across New Mexico. There is currently only one public bank operating in the U.S., in North Dakota. The Bank of North Dakota was chartered in 1919 to address circumstances that no longer exist in that state or anywhere else. Because it was created over 100 years ago, the Bank of North Dakota existed before most banks in that state were created. No public banks have survived in the U.S. since the Bank of North Dakota was established. Starting a public bank would consume public funds that could be used for other urgent needs such as health and safety, infrastructure and community development instead of offering financial services that are already provided efficiently by tax-paying, private-sector banks, and other financial institutions operating in a highly competitive marketplace. Public bank legislation has been considered – and rejected – in other states. The Federal Reserve Bank of Boston conducted a study of a public bank for Massachusetts in 2011. The study states, “Capitalizing a new bank along the lines of the initial size of Bank of North Dakota would require funds roughly equal to one-fifth of the state’s general obligation debt” or $3.6 billion. When similar bills were introduced in Illinois and Washington State, those states estimated the costs for creating a public bank at $827 million and $155 million, respectively. Taxation of Social Security Income: The NMBA will continue to press the Legislature to eliminate the state income taxation on Social Security benefits. For more than half a century after Social Security was enacted in 1935, Social Security benefits were not taxed in New Mexico. In 1990, the New Mexico Legislature passed a long and complex bill changing how state and federal pensions were taxed – and raising more than $13 million for state government. Buried on the second-to-last page of that bill was a single line that imposed the state’s income tax on Social Security benefits. This provision received no public scrutiny. New Mexico is only one of 13 states that tax Social Security benefits, and of those states, New Mexico has the second harshest tax, costing the average Social Security recipient in New Mexico nearly $700 a year. Taxing Social Security benefits undermines the purpose of the Social Security Act, which was designed to lift seniors out of poverty, not to fund state government. New Mexico currently ranks third-highest in the nation for the percentage of seniors living out of poverty. Social Security is the sole source of income for one in three New Mexico seniors, yet the average benefit is only about $13,900 a year. Meanwhile, the average annual cost of food, housing, and health care for older Americans is nearly twice as high: about $28,000, according to the U.S. Department of Labor. New Mexico’s Social Security tax also has a negative impact on our economy. If seniors could keep the money they now pay in taxes on their Social Security benefits, much of it would be spent immediately, and those dollars would go right back into New Mexico’s economy. State government would still receive significant revenues through the gross receipts taxes generated by that economic activity. Several such bills were introduced with the 2021 Legislature and all failed. n n EXECUTIVE VICE PRESIDENT’S MESSAGE continued from page 9